Latest / The Curve / RTC109: Pay off the mortgage or invest? Part One

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RTC109: Pay off the mortgage or invest? Part One · The Curve

• 0:00
  Hey, so I think you might be in this camp. Are you ready to buy a property? Maybe your first home?
• 0:05
  Hopefully, I want to. Yes, amazing. Well, with a new home added every three minutes,
• 0:12
  trade me property is more properties than any warehouse in New Zealand.
• 0:16
  And you can get the load on the latest property market trends, housing information,
• 0:21
  and insights for every step of your property journey, which I think when you are looking
• 0:26
  to buy your first home or make a move, you do want to make sure you have that information
• 0:30
  and that you feel like you're being guided with all of the right resources. You know,
• 0:33
  like it can be quite overwhelming sometimes. Yes, so if you're like soft and you are interested
• 0:39
  in this, then search trade me property today and make sure your next move is a great one.
• 0:45
  Welcome to Raising the Curth, a podcast designed to teach you everything you need to know
• 0:49
  to be better with your money. And the wise words of Amy Schumer were slipping carrots into the browny
• 0:54
  recipe. I don't really get the saying. It's kind of like eating vegetables that actually taste good,
• 1:01
  you know, like still not worth it. Are you on the script?
• 1:05
  It's basically like saying, investing in finance can be boring, but it totally doesn't need to be.
• 1:11
  Okay, okay, so we're making it fun by putting the carrot. Okay, the vegetables are just good for you.
• 1:17
  It's the browny recipe. Okay, we got there. We got there. Okay, okay.
• 1:20
  Well, you've really got a finance brain. Yeah, one of us has to. This is true. Okay,
• 1:25
  come and learn alongside me from Vick Harris, ex-fun manager, where I'm going to ask all the questions
• 1:31
  that you wish you could. And I'm going to be eating all the browny you wish you could.
• 1:34
  No, it's so not the joke, Vick. Okay, just come and talk and learn and laugh with us,
• 1:40
  because together we really can raise the curve.
• 1:42
  Okay, you know, I get so good at the beginning of our conversation.
• 1:56
  So I'm like, we need to think of funny stories. No, we don't. We just need to not always
• 1:59
  figure out finance, you know, I have got a giant gash on my toe right now.
• 2:06
  And honestly, do you know what I was thinking on my way here, because I did have to take
• 2:09
  the plaster off, because it was so ugly. Oh, God. Oh, my God. Sorry, I just was hoping she'd
• 2:14
  sit next to me. Love me. Love me. We've got an untrained dog in the studio. Do you know?
• 2:20
  Okay, I had a week to laneways for a hot minute. And I left about half an hour, but I'm saying
• 2:28
  my sisters. And anyway, the lady was looking after the kids. She took me, so for a walk with the
• 2:33
  kids. And I was like, amazing. She was like, she was the most well-behaved dog. No, she's trying to
• 2:38
  kiss me. No, no way. She was like, oh, my goodness. And then we went away for the weekend with
• 2:43
  this other dog and the dog was jumping up on the table, eating all the food and me, so I was just
• 2:46
  sitting there and I was like, goodness. All right, let's test it. If you don't pat her,
• 2:50
  does she bark? Because she will. You give it five minutes. I'm sorry, she wants love.
• 2:55
  Yeah, you know, no, but she could just sit in the corner and be good for an hour, you know.
• 2:58
  Me, so down. She hasn't seen you. Oh, she's in another way to make some feel.
• 3:03
  Because like a sister, she knows how to press the girl in the bed.
• 3:08
  I got in the bed. No, but back to my toe, yeah. It looks lovely.
• 3:13
  So I was trying to, oh, there we go. It wasn't even 30 seconds in and she's already growling.
• 3:18
  I had a lovely family weekend. And anyway, we were leaving the house. I was
• 3:22
  vacuuming, trying to get ready for a friend had basically lent it to us. So it was like, you
• 3:27
  wanted to leave it spick and stand when you left. And my, oh, please, I can just imagine.
• 3:30
  I was running around. I was really sweating. I didn't make it here on my face. And I was like,
• 3:36
  hold it. I was trying to get the end of the vacuum onto the stick thing.
• 3:40
  And I missed it. And I stabbed my toe. Now, I've got this, like,
• 3:44
  toe that won't stop bleeding. But I also don't want to put a giant bandage on it.
• 3:48
  Sometimes, sometimes passes a bit worse. Yeah. It's a little heel.
• 3:52
  And then I was trying to carry a chili burn, like two hours later. And the whole thing,
• 3:55
  like, got caught on the back of my other heels. So I've just got rid of it. I mean,
• 3:59
  in the wars moment, and I've been in the wars too. Oh, poor, wicked operation.
• 4:06
  We're just talking off my car. So I've his probably told more people that I've had surgery
• 4:11
  than I have. She uses as an excuse for us not getting work back to people, like email,
• 4:16
  like lack of email response. Like, sorry, we've had surgery. I literally spoke to someone
• 4:22
  this afternoon and I was meant to get something to them tomorrow. And I was like, I'm so sorry,
• 4:25
  if it's like a little bit too late, a folly through you under the bastard. I was like,
• 4:28
  she's not feeling that well. And I thought, imagine if this client saw you out, like,
• 4:33
  at a yoga class or something, I'm like, oh, hi, have you been? You're like, I'm fine.
• 4:38
  But no, but you actually have been out down and out. Down and out. Yeah. No, I've been trying to
• 4:43
  relax. I just, yeah, yeah. I'm fine, minus surgery, not life-threatening or anything. We're not
• 4:50
  allowed to talk about what kind of surgery it is. I'm like, no, I draw the line. I'm very open
• 4:55
  on this podcast. But no, I actually, like, wrote down, like, I just was lying there. It was quite
• 5:01
  funny when you come out of Genoa and Estetica, can you? Can you? Wait, so you were fully under?
• 5:05
  Yeah. It's like, yeah. And you went for, like, a casual walk with friends the day after?
• 5:10
  Yeah. I was, I was kind of fine. But I think just like bloated and stuff and, and feeling a bit
• 5:15
  gross the last couple of days, because the Genoa and Estetica has to go through you. But I think,
• 5:19
  yeah, the next day, I was just kind of a bit, probably a bit still. You said some weird emails,
• 5:24
  like some of them didn't make sense and I was like, funny. Yeah. It's funny you come out of
• 5:29
  surgery and they're like, now, we're happy to give you a phone, but no, social media. Really?
• 5:33
  And I was like, oh my god, people must go on there and accidentally post or post live or something.
• 5:38
  Yeah. Yeah. And really, they gave you social media. And I called foul man and I was like,
• 5:43
  having a good old chat. This is Vick's boyfriend for anyone who's like, what the hell is that mean?
• 5:48
  He's into flowers on the podcast months. That's quite cute.
• 5:51
  Anyway, and then I was like, I don't think I'm going to remember this whole conversation.
• 5:54
  And then literally, what did you say 24 hours later? I spoke to him again and he was like, yeah,
• 5:59
  we spoke about that. Yeah, we spoke about that. And I was like, oh my gosh, I literally,
• 6:03
  I'm so sorry. I was like, well, I do that though, and I'm not honest.
• 6:09
  But I was actually thinking I had a room to myself. I had like a menu I could choose dinner,
• 6:12
  breakfast. It was kind of quite bougie. And I made me think, wow, private versus public,
• 6:19
  and having the ability to have private health insurance and actually get it done while I was in
• 6:24
  New Zealand to get better, to heal, recover, move forwards. You're not have to wait in a
• 6:30
  bubble, because I'm going to have like, you know, get back to it. I was like, goodness, I have
• 6:37
  insurance. Yeah. And that was my curve related thought while I was lying in bed highs. Yeah,
• 6:43
  yeah, yeah, yeah. No, I think it's true. Yeah. I am. Yeah. I don't go into my insurance.
• 6:50
  But I will say like, you know, I do, but with medical insurance, like, I do think sometimes when
• 6:56
  that comes out, because it's quite a large amount, it's like, well, for me, I think it's about
• 7:00
  150 a month or something, which honestly is quite a lot, especially when you're not climbing
• 7:06
  for it, yeah, often. And I think the thing is, you know, how they senior those giant documents,
• 7:10
  and there's like 50,000 pages of like, this is where you can climb. I guess if anyone's reading
• 7:14
  that, so I find I often will go to a specialist appointment or go to whatever, and then I just don't
• 7:19
  climb back, because the admin side of things, I'm just like, I have it there, but I don't think I'm
• 7:24
  utilising it. This is a Sophie problem, not a curve problem. No, I'm just like, that, wow. Yeah.
• 7:30
  Like I had to use it for those appointments that I had, those specialist appointments, like a
• 7:33
  few months ago, and I've probably spent about 15 hundred. And my bank account's looking
• 7:37
  dire at the moment, but I still haven't reimbursed myself or contacted Southern Cross to be like,
• 7:42
  yo, these were my appointments. Because when my bank account is looking dire,
• 7:47
  I sit there and I go, what can I get? I know. Can I deal with the business account too?
• 7:52
  She's like, hi, have you seen this invoice? Hi, has this invoice been seen?
• 7:55
  But I look around, I'm like, do I need those shoes? Could I sell them? Do you?
• 7:59
  I honestly, I'll be like, and then I'll think, oh, yes, I could get reimbursed for that.
• 8:03
  Oh my God, I think, I think back and to what I could get money off, yeah.
• 8:09
  Maybe I should. Maybe I should.
• 8:11
  Because I think your mentality is always, how can I make more money? My mentality is, how can I
• 8:16
  save money? Or how can I spend less? Yeah. I mean, I do think like that as well, but it's more
• 8:22
  when I am dire. I'm like, does anyone owe me money? I'm like, hi, I remember three years ago,
• 8:26
  when you brought it up. No, but yes, it was, it was actually quite interesting.
• 8:31
  When I was talking to the Anetistist, the what? The Anetistist, he's the guy that
• 8:37
  knows what it is that you didn't say that I would write. I tried to skip up that.
• 8:43
  I tried to make it like you didn't know. An Anetistist. An Anetistist.
• 8:46
  Anetistist. Yeah. Anetistist. Anyway, and he was like, what do you do? What does he look like?
• 8:52
  Does he ever get between his two? I can't remember. Like you? No. Yeah. Anyway, he was like, what
• 9:00
  do you do? And I said, I've got my own financial education platform. We teach for women about money
• 9:05
  and investing. It's called the curve around. He's like, I need to get my two daughters to listen
• 9:10
  around. I was like, yes, you should. And he's like, you know, they're just like, Dad, you need to
• 9:14
  work more. And like to, he tries to get them interested in like investing and saving. And he's
• 9:19
  just like, they're terrible. It's it's spinning. They're spinning too much. He's like, and they
• 9:23
  just keep telling me that I need to work more to fund it. And I was just like, I don't know,
• 9:27
  it was just quite interesting. I was like, oh, that's not really what we do. You know, we're more
• 9:32
  about educating women to not try and snuff out a gold digging. Yeah. I was just kind of like, I was
• 9:37
  like, oh, I really should have, maybe it's on me to explain better what we do. Well, you hide at
• 9:41
  this point, like, it's pretty high. Yeah. This was low. Maybe you need to work on the elevator
• 9:46
  pitch. Yeah. I think it's a bit on, bit on me. Yeah. Yes. Must work on the elevator pitch.
• 9:50
  Must take business cards everywhere. No, business cards are done. I think QR codes is what we can
• 9:54
  have in the background of our phone. Yes. Yeah. So today, we are going to be talking about
• 10:00
  mortgages kind of. And because one of the questions we get sent in a lot, like whether it's email,
• 10:07
  social media, bumping into some on the street is like, okay, if I have money, should I be putting
• 10:12
  that towards a mortgage or should I maybe put that into stocks or elsewhere? And I think it's
• 10:17
  kind of what's hard to get you here around is the idea of like interest rates versus return,
• 10:23
  versus like it's quite hard to prioritize. Yeah. Yeah. And I also just think back in the day when
• 10:28
  you maybe had a bit more disposable income, mortgage rates were lower. It was like, okay, I've
• 10:32
  got a bit of spare cash. I'll pay off my mortgage then I invest or something like that, whereas
• 10:35
  now it's like, oh, I don't actually have the option to choose one or the other. You know, I don't
• 10:40
  have the luxury of having the choice to put money into both investments and mortgage. So I
• 10:46
  need to choose one or the other. It's like, what should I choose? So I think even like for me with
• 10:50
  my student loan, like I still got about eight grand on my student loan. Yeah. And before we go back
• 10:55
  over to London, I've got to be like, oh, what's worth it from a, like what makes more sense for me
• 11:01
  to keep that in the bank, me to put that towards property or stocks or just get rid of that debt
• 11:06
  based on whatever that interests are like crew by going overseas. And it's sometimes a bit like,
• 11:10
  oh, God. Yeah. And especially because mortgage rates have increased as well, interest rates have
• 11:15
  increased. And there's a lot of chatter about mortgage rates. Yeah. And it's there's a lot
• 11:20
  a lot in the headlines and runs like, oh, gosh, am I doing the right thing? And you probably
• 11:23
  talk to friends and they'll be doing something different and it is and I hate saying this because
• 11:28
  it seems like such a problem. Oh, it's so it's up to you in your personal situation. It is because
• 11:33
  investing is so personal. Money is so personal. I know that it's personal. Everyone's
• 11:37
  interest is different. So I can't be like, people will be turning off. Okay.
• 11:40
  Even a single person has to pay off their mortgage first. Because you know, I know, but I think
• 11:46
  there's got to be some kind of not rule or like a recipe that you can follow where it's like, okay.
• 11:51
  Oh, actually, it's so smugly. Well, I don't prepared for this podcast.
• 11:57
  So, yeah. So actually, the majority of our audience, 60% of listeners, oh, in their own
• 12:04
  home, we'll have a mortgage, which is quite amazing. Well, no, we're not allowed to say that
• 12:09
  wouldn't we? Yeah. Yeah. We told her off for using the same adjective, which is quite surprising.
• 12:13
  It is actually kind of shit, to be honest, to be on the 40%, I must say, because I'm a non-homona
• 12:20
  and I'm in the minority, which is quite surprising. I haven't been in shit though.
• 12:25
  I don't know. I just have, I want to be able to buy a house. Yeah. And I haven't been able to
• 12:30
  yet. And honestly, today I even had a meeting with my like a mortgage broker. Oh, my God. I know.
• 12:36
  But the problem is I find even just like submitting the forms hard. You know, I've
• 12:41
  before I definitely did the form situation for months. They're like, hi Sophie, just checking in to see
• 12:47
  how you're going. And I'm like, it's so overwhelming. It is. I felt like I grew up about 10 years and
• 12:53
  10 weeks. Yeah, I don't know. It feels like a part-time job applying for a loan.
• 12:58
  It's not, but I just think when you've never done something before, anyway, the point is,
• 13:02
  what I was trying to say, is that it's something I would like to do. Yes. And I feel like I've
• 13:08
  tabled in stocks and I've got my kiwi saver to a point where I could buy property.
• 13:13
  So I've got something to excite you then to like be like, oh gosh, this is such an unknown world.
• 13:18
  That I'd be like, if you said to me, hey, so cool, this is what you need to do.
• 13:22
  This is the house that you're going to buy. I honestly would be like, brilliant, help me do it.
• 13:26
  I'll do it now. Like I have, I'm not like, oh, my God, I'm so excited. Look at what's
• 13:31
  available in Montgomery Bridge. I'm not excited by looking at houses or by, because I don't,
• 13:38
  I don't even really want to own the house I can go and hang out on it. I just want to own it
• 13:42
  so that I can have an investment. Is that that? No, I think it's just, it's going to be the
• 13:49
  biggest purchase you'll probably ever make. So I think you should be a bit excited or a bit
• 13:54
  interested in what you're actually going to be indebted in. Do you know what I mean?
• 13:59
  I shouldn't be buying it. I think the thing is because you can leverage
• 14:03
  with property, which I'm sure we'll go into more detail soon. And if you haven't actually
• 14:08
  listened to our podcast, which is the one that we spoke about leverage, I just got to lock
• 14:12
  in case, because we've been into a big deep dive on this. But it's basically the idea that in order
• 14:18
  to buy a house, you don't need to front up the full amount. So if you're buying a million dollar
• 14:23
  property, you don't need a million dollar deposit. That's not how it works. And so by being able to
• 14:27
  borrow money from the bank, it means that the return that you're getting is also on the money
• 14:33
  you've borrowed as well as the money you have. So even though the returns aren't, it's not like
• 14:38
  hugely different to invest in stocks or property because you're able to leverage and have a bigger
• 14:43
  amount that you're earning money on, therefore means that your return can be greater. And you can't
• 14:48
  leverage really on anything else, can you? Like if I wanted to leverage on... Well, that's kind of
• 14:54
  like taking a loan for business. Right. It's the same as that. You can actually borrow money
• 15:01
  and invest in stocks, but that's what the experts do. Right. We want to do that. Super risky.
• 15:05
  So you can leverage on a few different things, but the most common and what a lot of people do
• 15:13
  is take out a mortgage to buy a house because it is so expensive to buy it outright.
• 15:18
  Did you find that episode? It's raising the curve episode 10 and it's what's better.
• 15:22
  And we've seen shares of the property market and we touch on investing in both and things you need to
• 15:28
  be aware of really raising the curve 85 as well, how Vic made 800,000 in six years, talking about your
• 15:34
  journey into property. I think have a look through some of our property episodes of this isn't
• 15:38
  something that you have explored before because for me getting my head around leverage was definitely
• 15:44
  a bit of a bind. Especially if you're not a numbers person, it should be quite... Yeah, it can be quite
• 15:50
  confusing or you just might need to need it explained in a few different ways, which is absolutely fine.
• 15:57
  So yes, have a look at those because it is a bit of a game changer and why so many particularly
• 16:03
  New Zealanders are so obsessed with investing property. I think I only really understood the idea
• 16:09
  of getting on the property ladder and how people are like, oh you should get on as soon as possible,
• 16:14
  blah, blah, blah. I don't think that made much sense to me until I understood when you borrow
• 16:18
  money from the bank, you're magnifying your ability to either get more returns or potentially be
• 16:26
  at even more of a loss with the idea that the returns or the losses are compounding on a large
• 16:32
  your number and you don't have to have that large number. Sorry if this is down and confusing for
• 16:36
  anyone listening, but it's like if you invested $100 and you got a 10% return on that versus a
• 16:41
  few invested $1 million and got a 10% return on that. Yes, thank you, that's easy. The percentage
• 16:46
  return is the same, but the amount you've invested is a lot bigger. So therefore say that was
• 16:52
  $100 of your own money, but then it was a million dollars and half of that you borrowed from the
• 16:57
  bank and half you'd actually made yourself, you know, you still would be able to invest a larger
• 17:03
  dollar amount. And the point is that you don't have to give the bank any of your returns. So say
• 17:08
  you, that example of a million dollars or say you only borrowed 500,000 from the bank, you only
• 17:14
  have to give 500,000 back to the bank. Yes, so it's, yeah. Their payment is the interest you pay on
• 17:21
  that 500,000. It's not the gain that you make and the price of the house. So your thank you for
• 17:28
  letting me borrow that money is the 7% mortgage rates we're paying at the moment. So this is just
• 17:34
  7%. So they don't double-dip and go, hey, can you pay me 7% and can I get a bit of the increase
• 17:40
  in price of your house? Thank you. No, they don't do that. Thank goodness. But yes, so this is a very
• 17:46
  relevant podcast I hope for a lot of people about, yeah, whether you should be investing or paying
• 17:51
  off your mortgage. And it's also really helpful if you are sitting there and you're like, cool,
• 17:57
  I'm actually going to go for a pay rise this year. I'm going to ask for an increase in my salary
• 18:02
  or you get a bonus or you get a tax back or something. Well, you know, it would be super relevant
• 18:08
  because it's like, okay, do I put that big chunk of money into paying off a mortgage or investing
• 18:12
  because a lot of people have asked that as well. So, but to summarise the episode, the very beginning
• 18:18
  of the episode. Is that a good idea? Should we just drag it out to the very last minute? We'll make
• 18:24
  this a four hour episode. I mean, we have it to be for ages and we haven't been released. And that's
• 18:29
  a wrap. Thanks everyone. No, but investing your money only really makes sense if you can earn more
• 18:37
  on your investments after tax than your mortgage rate. So, if your mortgage rate is seven percent
• 18:43
  and you reckon you can earn more on your investments, then it makes sense to invest that money
• 18:49
  because you're making a better higher return on it. Can we break that down? No, wait, hold on,
• 18:54
  before we move on to the caveat, though, can you maybe give me a diagram or a really little numbered
• 18:59
  example? Because if you're walking or you're doing something, I think it might need to be,
• 19:03
  for me, I'm sitting here staring at you. I'm still like, the thing with investing is there is no
• 19:08
  real guaranteed return, whereas what you pay at a mortgage rate is pretty guaranteed. If your
• 19:13
  interest rate is that you're paying is seven percent, whether it's fixed or floating, which we
• 19:18
  can get into as well. But usually the bank will be like, okay, for a set period of time, you have to
• 19:23
  pay seven percent per year, which you know is a set dollar amount that comes out each month that
• 19:27
  you have to pay. The bit where it gets tricky is that when you invest, there's no guaranteed,
• 19:33
  particularly if you invest in stocks. We say on average you can get 10 percent return per year
• 19:39
  over the long term, but that could be negative 2 percent one year, it could be positive 15 percent
• 19:44
  one year. So that's where it's hard to give a definitive answer of what's fixed. Because on one
• 19:50
  side you have a fixed amount that you can be like, well, you know that you're going to be saving
• 19:54
  x amount by paying off whatever. But the stock market is up and down. That's where it gets tricky.
• 20:02
  So some people might be like, you know what, I'm willing to take the risk and invest that extra
• 20:08
  money and invest it for the long term where I know that the return will most likely be about 10 percent.
• 20:16
  Whereas other people might be like, you know what, I don't think I can get that. For whatever
• 20:21
  reason there might be, there might be a bit of older, they don't want to take that risk,
• 20:25
  they might be like, you know what, I'm just going to, I'd rather just the certainty of paying off my
• 20:29
  mortgage and also I might just hate debt. I'm quite debtive, I would rather. Yeah. I guess it's
• 20:35
  it also, so say mortgage rates are 7 percent and say, so how would you then figure out, so say
• 20:42
  you owed $100,000, you would figure out what's 7 percent of that, which is 7 whole annals.
• 20:47
  Is that right? 7,000 of them, I think that's right. Then, then would that be
• 20:54
  figuring out, okay, so if I was to then invest that 7,000 over a year, what could I be making on
• 21:00
  that? And is it more than what I'd be paying off? Is that right? It's kind of, get rid of the dollar
• 21:05
  amounts. I think that it's more the percentages if that makes sense. Maybe let's go back to maybe
• 21:10
  a few years ago, when the banks interest rates and mortgage rates were like 2 to 3 percent.
• 21:15
  It was kind of a no-brainer then to invest your money. Stop market. Yeah, because you're like,
• 21:20
  look, the stock market, even if it gets 6 percent on average, it's better than, you know, I can
• 21:26
  invest in some pretty low risk things and still get a better return than I can in my mortgage.
• 21:33
  There's probably people listening that are like, but actually, so the flip side of that is,
• 21:37
  if you are early on in your mortgage, say you've just bought your first house and your mortgage is
• 21:43
  quite high, because you haven't had years to pay it off. So, you know, usually over time you start
• 21:49
  with a higher mortgage and you pay it off over the years. So the dollar amount of your mortgage is
• 21:53
  quite high. Oh, so 2 percent is actually quite a large number at that point. Yes, you're, yes,
• 21:59
  exactly, but also the size of your mortgage is quite a large number, so your best to pay it off
• 22:04
  as quickly as possible. Okay. Because if interest rates do start going up and you've managed to pay
• 22:10
  your interest on it, yes, and you've managed to pay down a lot. So there's that that comes
• 22:14
  into it too. So there's the, what return you think you can get, but also how early on you are in
• 22:20
  your mortgage. So therefore, what size is your mortgage? If it's massive, if it's, if you're at the
• 22:25
  tail end and you're like, you know what? No one's at the tail end. Seven percent. And I've only got
• 22:30
  $50,000. Oh my gosh. That's the dream. That's why banks lend you the money, because anyone pay
• 22:38
  their mortgage off by the time they die. Like, honestly, there can't be that many people that are
• 22:42
  mortgage free. Yeah. Well, I mean, this, this is another thing is that most people that do pay
• 22:47
  off their mortgage, then they're like, cool, now I can borrow more. You know, it's like this cycle,
• 22:51
  because you're like, well, well, well, you've paid it off. Yeah. And you've still got the asset,
• 22:55
  you've still got your house, which is worth say, now you've got a million dollar mortgage free house.
• 23:00
  You can go to the bank and say, hey, can I borrow 500,000 and buy another house?
• 23:05
  So this is the ladder thing. This is the whole, yeah. So it's like, you know, people with money get
• 23:09
  richer. Like, it's the idea that might make, might make money that money whatever they're saying is
• 23:14
  yeah. But I always really want to own something that I don't want to just see for this channel.
• 23:20
  Remember this. Remember this when you're sitting there bogged down in paperwork because it is time
• 23:26
  consuming, but I kind of remember that time in my life now. You know, yes, it seemed
• 23:30
  overwhelming, confusing at the time, just like it does now, sorting out my bloody tags.
• 23:34
  But I'm like, you know what, I'm going to be better for it. Oh, yeah, the tags.
• 23:37
  That's not the, this is not the T-word. Shit. Anyway, okay. So, sorry. Yeah, that's actually a good idea,
• 23:43
  though. Like, when you start to be like, I don't want to learn about investing. This is boring.
• 23:47
  Or this is overwhelming, or I don't want to do my paperwork. Whatever it is, visualizations,
• 23:52
  mantras, whatever you need, like something to get you through the bog down this because the
• 23:56
  reality is it, it is hard, and it's also work. It's not just like, and don't be afraid of if
• 24:01
  you're talking to an expert, be like, sorry, can you explain it in a different way? Or, sorry,
• 24:05
  I still don't get it. Because for them, they talk about the stuff all the time. They're talking
• 24:09
  in tech speak. They're talking in mortgage speak. You don't. And if you don't understand,
• 24:15
  then you're not going to enjoy the process. You're not going to learn. You're going to come out
• 24:19
  feeling probably confused and overwhelmed. And you want to, I don't know, you want to feel
• 24:23
  that sense of empowerment of understanding and being like, oh, my God, I get it. And yeah,
• 24:28
  so just ask for explanation in different ways because they should be able to.
• 24:32
  This morning when I had that meeting with the smogger trucker, quite good timing, by the way,
• 24:36
  having this record today. I had a head emailed me, being like, hello, you still have not filled out
• 24:42
  your forms. And I was like, oh, my God, I hate forms so much. Like, actually, the baby in my life.
• 24:47
  And I actually emailed him back and I said, I'm really bad with paperwork. This is something I
• 24:51
  struggle with massively. I'm actually neurodiverse. Do you reckon you could, is there any other way
• 24:55
  that I could do this or like, is there any extra help or something? And I've never done that before.
• 24:59
  I never was like, actually, the way that you do this doesn't working for me. Like, you know,
• 25:03
  he replied, he was like, totally happy to run you through this, like put some time in my calendar,
• 25:07
  or whatever. And the first thing you said to me on the call was like, I was kind of feeling a bit
• 25:12
  embarrassed. I was like, oh, sorry for this. Like, I know you probably don't have to like put that.
• 25:16
  He was like, oh, no, actually, I've also got ADHD totally get it, like, not in a show at all.
• 25:21
  Like, I'm really going to go through with you. And it was one of those moments where I thought,
• 25:24
  like, just what you're saying, if you don't understand something, it's, there'll be millions of
• 25:30
  other people who feel exactly the same. So don't feel like you can't ask the question because you're
• 25:34
  going to stay in the dark even longer. If you want to do something IE by a house, but you feel
• 25:40
  like there's a big roadblock, I think it is. It's important to know that you can ask questions.
• 25:46
  That's why we even started the curve. And I hope that people that listen have started to do that
• 25:51
  more. And I think they have. And I always get, I actually get quite fucked off when I'm talking
• 25:57
  to someone. And they're just verbal diarying some jargon that, to sound smart themselves.
• 26:04
  And I'm just like, sorry, I don't understand or can you explain it? And I'm like, well, I'm sorry,
• 26:10
  if I'm not understanding, I'm not going to be a client of yours. You know, it's just kind of,
• 26:14
  if you don't have the time of day to explain something to me so that I can understand, I don't want
• 26:20
  to be a part of this relationship, whatever kind of dynamic it is. What's a word that's like
• 26:28
  infognally or something? It's like, um, sorry, there is a point to this. Yeah, sort of.
• 26:37
  Someone taught me a word the other day. It was to do with, they used it to describe a garden.
• 26:41
  And I remember being like, you should ask what that is because that's a really cool word,
• 26:44
  which now I've obviously forgotten. But it's kind of the same thing. Like, you're not going to
• 26:48
  learn unless you ask someone again, if they're saying something that makes no sense, whether it's
• 26:51
  like a cool word that you want to learn or you don't understand what they're talking about. Yeah,
• 26:55
  you never learn it, if you don't ask questions. And so it's quite funny that you've noticed that
• 26:59
  in terms of the way people speak. But, um, I really want to know what that word was. It was really
• 27:03
  cool. But you, sorry. So, so when I do say it's personal preference, it very much is,
• 27:09
  unfortunately, because everyone will wear different stages in terms of their, their
• 27:12
  mortgages, how long they've had it, what their size of their mortgages. Um, and so you have to
• 27:18
  realize, you know, would you be comfortable with the ups and downs of the, oh my god,
• 27:25
  just lost my journey for, we're recording for 40 minutes. And we haven't even got to the
• 27:30
  fucking juice of this podcast. I just saw the sunglasses and her bag, the fucking cool. And I
• 27:35
  just thought I'm just going to wear them all the way record for a little minute. Sorry, continue.
• 27:39
  Yes. So, and when you say it's someone's like, are you like, you know what, I'm going to take the
• 27:45
  risk. I'm going to invest in the stock market, because I don't really care. And I'm risk-averse. And
• 27:49
  I can weather the ups and downs. And I'm, but I think you need to explain the risks because someone
• 27:54
  might be listening to this and don't really understand what risk means. And risk for anyone that
• 27:57
  knows, like if you, if you, sorry, if anyone that doesn't know, risk basically means that the
• 28:03
  movement up and down because the stock market is not guaranteed. So you might put $5,000 in the
• 28:08
  stock market that money one year might be down 5%, it might be up 50%. If you need it in the short
• 28:16
  term, i.e. maybe six months, a year, two years, whatever. And you have to pull it out when it's
• 28:20
  down. That's where the risk is. That's the scary part because you could potentially lose it if
• 28:25
  you need that money and you have to take it out at a point in time when the stock market is not
• 28:29
  doing well. And that's kind of what that means when she says, if you're willing to take the risk,
• 28:34
  it's like if you don't need that money and you're pretty confident that say you've got a 5%
• 28:39
  interest rate and you're like, well, you know what? I know that on average over whatever 10 years,
• 28:45
  the stock market is probably most likely going to deliver at least double. And I'm happy to put my
• 28:50
  money there and not worry about it for a long time. Then you're comfortable with that risk.
• 28:54
  That's what she means. Yeah. And then there might be people that are also in the camp of like,
• 28:58
  you know what? I just want the peace of mind of being mortgage free. I just, that has been my goal,
• 29:03
  you know, that was what my parents instilled in me is to, you know, you should be paying off your
• 29:08
  mortgage. That's, you know, first and foremost. And then you should start thinking of investing.
• 29:12
  And that's fine as well. You're still earning effectively at 7% or whatever you're paying on your
• 29:18
  mortgage because you're paying it off. So you're effectively, you're because you're paying off
• 29:24
  your mortgage, you're effectively earning that interest rate as well. That's bad makes sense.
• 29:27
  I think the reason people ask this question a lot actually, Vic is because they just want the
• 29:32
  best return. They want to use their money in the best possible way. But I think what people don't
• 29:36
  realize is that with using your money in the best possible way, I probably being a little bit
• 29:41
  riskier. That's where you're going to get a little bit more reward potentially. Yeah.
• 29:45
  But then you need to understand that you are taking a risk. I think most people say, what's the
• 29:50
  best thing? Should I do this or should I do that? It's like, well, if your mortgage, your interest rate
• 29:56
  is lower than what the stock market is returning on average, then surely the stock market
• 30:00
  makes more sense, right? Yeah. But if you're going to be stressing around it every night,
• 30:04
  and you're not going to sleep, then that's not the best outcome.
• 30:12
  I love before we even started this podcast, she's like, I don't even know why I need my laptop
• 30:16
  because I don't have any notes on this. But I love that you just swung in and it's great.
• 30:23
  It's great. No, it's good. I feel a bit drunk, actually. I'm not sure why.
• 30:27
  I feel like you are. Yeah, I don't know. I think it's because I just
• 30:30
  taken, I took that ADHD medication for the first time. No, not the first time, maybe the third time.
• 30:35
  And you're not meant to have coffee with it. So I think I'm like, we're kind of on one right now.
• 30:39
  Well, I think we're great. But I'm loving my child. I'm like, you're on ADHD. Yeah. Sorry.
• 30:44
  You're a trim little holy shit. Which should end coffee. So I'm kind of a bit counteracting.
• 30:50
  Have we explained anything that was in your notes that you wanted to talk about today?
• 30:53
  We're getting there. Yeah. We're slowly getting there. But yes. So I feel like we're jumping
• 30:58
  over the show. But anyway, we spoke earlier about that if you're in the early years of your mortgage,
• 31:02
  how you should be paying down, you should be prioritising paying off your mortgage.
• 31:07
  Even if you think you can kind of get more in your investments, maybe you should be more in the
• 31:10
  camp of paying off more of your mortgage. So because if you have a $900,000 mortgage and interest rate
• 31:16
  through at 7% at the moment in New Zealand, you're paying $63,000 in just interest.
• 31:23
  So you're paying there a year in just interest. So the quicker you can pay down that 900,000,
• 31:29
  the better. Because if you paid that off really quickly and say you got a bonus, say you got a pay rise,
• 31:35
  say you got a tax back, inheritance, whatever, and you're like, I'm going to put that straight
• 31:38
  onto my mortgage. And you got that down to 100,000 when interest rates are 7% like they are today,
• 31:44
  you're only paying 7,000 in interest. So that's why people say, and that's why I find the
• 31:50
  older generation sometimes is like the quicker you can pay off your mortgage, the better. Because
• 31:55
  you're paying $63,000 in interest versus 7,000, that's a huge difference. And that's not even
• 32:01
  paying off the actual lump, some of your mortgage. That's just the interest. Does that make sense?
• 32:06
  So I'm currently on interest only because I can't afford to pay off principal at the moment.
• 32:12
  And principal is like the actual loan amount. So if you have a million dollar mortgage,
• 32:17
  that's the principal. The interest is what you, is the percentage that you pay on that million
• 32:22
  dollars. So when you take out a mortgage, you, when you pay, when you start paying it off,
• 32:28
  you have to pay a portion of principal and a portion of interest. And the early stages of your
• 32:33
  mortgage, the majority of that payment is interest. Yeah. And you pay a small bit of principal
• 32:39
  as your, the size of your loan gets smaller. That kind of dynamic changes to the majority being
• 32:45
  principal and the small amount of interest. So would it like rule of thumb may be focus on your
• 32:50
  interest first to pay things down. And then you could look at the stock market with that kind of
• 32:55
  be like a general. Yeah. So that's why it depends firstly what size of your mortgage or how early
• 33:02
  on you are in your mortgage journey. You might also want to focus on your house if you've just bought
• 33:07
  it, right? Like totally buy a house and you're like, holy, I've got a whole million dollars of debt.
• 33:12
  But you're not even contributing to try and pay it off psychologically. That might not be great
• 33:16
  for you. Yeah. To then be investing elsewhere. It's scared the bejesus out of me. Yeah. Being in debt.
• 33:21
  Being in debt. Being in debt that much. I was just like, oh my god, and I keep having to think,
• 33:24
  I've got an asset. I've got an asset. It's worth multiple times more than that. But just opening your
• 33:29
  bank statement and seeing a negative value. Oh my god, I can't even imagine. So wait, is it in your
• 33:34
  bank? Does it say that when you go on, it's like negative? I've got a separate bank account.
• 33:37
  I don't see it every day. But I still just absolutely do my head in. Which is quite good sometimes
• 33:42
  if you want a reminder of should I need to pay off my mortgage? But like do you or you can't
• 33:48
  be worried about it anyway? I think you're pretty well aware. The bank doesn't really let you forget
• 33:53
  that you've got a mortgage. So if we look at paying off your mortgage, I guess the psychological aspect
• 34:00
  of this is just like how liberating it can be. Imagine being debt free and you own this
• 34:05
  million dollar asset. And then if you sold that, you get that full million dollars back into,
• 34:10
  you know, like how liberating. Oh my god, is that how it works? Yeah.
• 34:13
  And then whatever you put towards paying off your mortgage, you've now got its free income.
• 34:17
  So the quicker you pay off your mortgage, the more you've got as disposable income.
• 34:21
  So if you were paying off, say $5,000 a month on your mortgage, and then you're like,
• 34:25
  the bank's like, Hey, congrats. You've paid your mortgage off. You've now got to
• 34:28
  spend $5,000 every month that you can hopefully invest. But some people might just be like, you know
• 34:35
  what? I've been so strict on myself. I'm going to go spend a little bit, which is absolutely fine.
• 34:39
  But so it can be quite liberating to have now have all the disposable income, which is why people
• 34:44
  try and do it before their retire. Because then you've got that that spare disposable income
• 34:50
  to spend on other things. What I kind of don't get is why you spend your whole life paying off
• 34:55
  a house to only then use that money later in life, like what you're kind of saying. In terms of say
• 35:01
  you were mortgage free and you got to $75, and then you were like, cool, I'm going to live off the house.
• 35:05
  So what do the people say? Yeah. What does that mean? Well, if you didn't own your own house,
• 35:10
  you'd have to pay rent. Yeah. So you'd have to pay rent out of your pension or out of your
• 35:14
  retirement. Which is the fact that you're not having to pay rents, therefore, okay. Yeah.
• 35:18
  So you're not actually technically living out of the house in terms of you're not getting money
• 35:22
  from that asset. It's just if you sold it, you were getting money. Yes. Yeah. So you could sell it
• 35:26
  in down size. Yeah. And therefore you might have a couple of hundred thousand that you could
• 35:32
  put in the bank and live off or live off the interest. So there's lots of options when you've got
• 35:37
  a large asset that you own yourself that the bank doesn't own part of. That makes sense. So yes.
• 35:44
  For the bank to then not owner, you would have to sell the house. No. You just paid off the mortgage.
• 35:49
  So there's a mortgage because you're paying the bank back as sorry. This is sorry. That's
• 35:52
  be so annoying people. It's just because I've never I've never had a loan like that. So the bank would
• 35:58
  own say the house price didn't change at all and you borrowed 50% as a mortgage and you'd pay that
• 36:04
  off then eventually the bank would own 40% the 30% than 10% and 0% and then you own the whole thing
• 36:09
  and you paid them back. Oh yeah. Okay. So it's a trusty parent that you're borrowing from.
• 36:15
  It's like the parent that you're borrowing from. Yeah. And you're like, here we go.
• 36:19
  Yeah. There you go. Mom, there you go. I'm paying you back every month. Yeah. Got it.
• 36:23
  Yeah. So yes, there's there's some things to consider though. If you are in the camp of like
• 36:27
  I'm just wanting to pay off my mortgage. I want to be mortgage free. I mean you never really
• 36:31
  hear anyone being like, oh my gosh. I wish I hadn't paid off my mortgage so soon. You know,
• 36:36
  like people are pretty stoked once they do is that a large portion of your wealth will be tied up
• 36:45
  in your house. Yes. And that's not liquid because you can't use the money. We just spoke about.
• 36:50
  And it's like you said, you don't get income from it. So yes, you might have disposable income
• 36:56
  because you don't have to pay your mortgage anymore. But yeah. Okay. But it's not like an investment
• 37:00
  where you can generate unless you rent it out or something. Yeah. If you rent it out, you can rent
• 37:04
  out a room. Yeah. You could do that. But so you'd be kind of what we call asset rich but cash poor.
• 37:09
  So you would have a lot of assets but they could be quite a good like tote bag slogan. Yeah.
• 37:16
  Something like that. It's like we played a big asset. Check out my asset. It's like a really
• 37:22
  empty wallet. We played a lot of monopoly deal over summer. Fun. It's such a game. And yeah, a lot
• 37:28
  of the time I was asset rich but cash poor. A lot of properties but no cash. So therefore when I
• 37:34
  needed to pay people, I had to pay them in property. I had to sell my property. Oh my god,
• 37:37
  that's such. I know that's so simple. That's a really good. Because I had no cash in the bank.
• 37:41
  I was like, oh my god, I'm going to have to sell my house to pay you. And it's kind of exactly
• 37:45
  the same if you have no disposable income. Yeah. I guess also another risk element with property is
• 37:51
  if you do have to sell because you need the money and property market is shilling itself,
• 37:56
  then you also might not get what you really should be from a value perspective. And it's costly
• 38:01
  and it takes time. You can't be like, oh, here, have a few bricks for the groceries.
• 38:05
  Yeah. It's very much like big ticket loaders. Yeah. So yeah, it can take a while to sell.
• 38:13
  And you can't access your wealth as easily as you can with investments. Not that we can don't
• 38:18
  that. Not that we suggest that. No, don't do it. Trust me. Take it for some of that to pull it all
• 38:22
  out. So it's just full. Yes. So. Like, I'd say, no, that can I just tell you. So the last time
• 38:29
  that I checked my key, we say that I had, I think it was like 46,000 or something or maybe it was 48.
• 38:35
  Anyway, now it's 56 something. And this was not long ago. Remember we were in London and we
• 38:40
  checked it. It's so much more because I was looking at my numbers this morning with the mortgage broker.
• 38:44
  And I thought, holy shit. I logged in. I was like, I actually think that's way more than what I had.
• 38:50
  And then I looked at the numbers and it was. It's such a good feeling. Yeah. No, it's great. Yeah.
• 38:55
  I love it. I didn't even do anything. It was just sitting there. It doesn't. It doesn't
• 38:58
  happen all the time. There will be times when you're checking it. We'll go down, but it's
• 39:01
  majority. You could just be positive. I wasn't second, you know. I know. I know. Sorry. I'm just
• 39:06
  being a realist. I know. I know. Yeah. I mean, I have to come back to this and do part two.
• 39:11
  Yes. I've got to fix a little summary of pros and cons. Or maybe I'll, you know, just
• 39:15
  angle the carrot and be like, listen to the next episode of pros and cons. Yeah. I think that's
• 39:19
  a good idea. It's a real tactic. Yeah. But one thing just to wrap this up is if you're deciding
• 39:26
  that, you know, what I want to pay off my mortgage and you're in that camp, one thing to be
• 39:30
  wary of is lifestyle creep. And we've kind of spoken about this is that if you start paying down
• 39:35
  your mortgage and you're like, oh, cool. I've paid off some of my mortgage. And then you're like,
• 39:39
  well, I can borrow more now. And then you borrow it again. And you're kind of back to square one.
• 39:43
  So, isn't that what so many people do? But they do that. It depends what you're borrowing
• 39:47
  before you can borrow it to renovate. You can borrow it to buy another house. Yes, that's great.
• 39:51
  But if your prime focus is to pay off your mortgage, you're not going to get that if you keep
• 39:55
  borrowing money. As long as you're borrowing more money to invest in something that's going to
• 39:58
  generate you a good return again. There's not just most people do though. Yeah, but something,
• 40:03
  you can invest in bad properties. You can invest in properties that don't do well or you can borrow,
• 40:08
  you could borrow money into a house to go on holiday. Well, could you? I mean, you could lie to the
• 40:15
  bank if you want it. But imagine how gutted you'd be if you spent it on like a European holiday.
• 40:20
  Yeah. And then you had to pay it back and you didn't have any kind of anything that was appreciating
• 40:25
  and value. And if some people do, like I could be like, you know what? Let's borrow against my house
• 40:31
  and invest in the curve. Oh, let's do it. No, and the curve goes tits up. And then I'm stuck with
• 40:36
  the mortgage. You know, there, there are stories where I've heard friends' parents and they have
• 40:42
  paid off their mortgage and they've married someone else. And then their partner is like, hey,
• 40:46
  let's start a business and let's take a loan against your house. Business doesn't do well.
• 40:51
  They fuck off. And then they're like, yeah. So I think it's like, I've heard so many stories like
• 40:56
  that. So it's just once you pay a few mortgage, it does give you a lot of flexibility, but don't
• 41:00
  carry it away. Yeah, just be careful because that's a huge effort and a huge sacrifice you've made.
• 41:07
  And you should be so proud of yourself for getting there to pay a few mortgage and have this amazing
• 41:10
  asset. Don't then go if it up. Just bear it wise. Before we finish this book, I have to apologise to
• 41:16
  you and Miso. She was incredibly well-behaved. Well done, Miso. Good girl. Come here. Come here.
• 41:23
  She's been so good. So yes. We will do a part two of this. We'll do a part two.
• 41:28
  Thank you so much for listening to Raising the Curve. These conversations are designed to
• 41:32
  teach you everything that you need to know to be better with your money, from saving, to investing,
• 41:37
  to talking to your friends about your salaries. And if you liked what you heard, we would love it.
• 41:42
  If you could hit subscribe button please. Or leave a review. It'll only take five seconds
• 41:48
  and it would really make our week, our year, our month. Okay, lots of love. See you soon. Bye.
• 41:58
  Hey, so for you, ready to buy a property yet? Maybe your first home. I am trying. I've
• 42:04
  written. I'm close. I'm feeling like it's in my future, hopefully, in the next 12 months.
• 42:09
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• 42:17
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• 42:20
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